Quote:
Originally Posted by TractionControlOff
Good points grp2c and maxdriver. There are a couple other considerations that bolster your calcs: 1. The savings of 8%/year is guaranteed. We all know about the .1 or .2% that many guaranteed investments/savings are paying these days. Investing in the market is not guaranteed so that should be considered. 2. If you didn't save the 8% you would have to pay it with after-tax dollars so you should compute the tax-equivalent yield. Assuming you are in the 28% tax bracket, that would make your tax-equivalent return (the return you would need before taxes to net 8%) around 11.11%. That's close to the market's non-guaranteed average historical return. If you are in a higher tax bracket, it's even better.
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excellent point about the tax equivalent yield